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IPFS News Link • Economy - Economics USA

Why Stimulus Doesn't Lead To Organic Growth

• by Lance Roberts

From Joe Biden, to Janet Yellen, to most members of Congress, there is a demand for more "stimulus."  However, the reason the previous programs failed is the stimulus doesn't lead to organic growth.

Let me explain.

Joseph Carson, the former Chief Economist at Alliance Bernstein, recently noted:

"Suppose Congress passes something close to Biden's Administration stimulus proposal of $1.9 trillion. In that case, that will lift the cumulative amount of fiscal stimulus in the past 12 months to $5 trillion—three tranches $2.2 trillion, $900 billion, and $1.9 trillion.

In the past year, nominal GDP totaled $21 trillion, so the cumulative injection of fiscal stimulus amounts to almost 25%.

Nothing in modern times comes close, especially during peace times. CBO published a report in 2010 on the military costs of significant wars. The military war costs of World War 1 amounted to 13.6% of GDP and World War 11 35.8%—-so the current spending/stimulus is in the middle of the two World Wars."

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